THE CHALLENGES OF TECHNOLOGY ADOPTION IN OIL AND GAS INDUSTRY
THE CASE STUDY OF SOLAR ALERT SDN BHD
EIDIL HARZEQ BIN ZAINUDIN
UNIVERSITI TEKNIKAL MALAYSIA MELAKA
‘I hereby declare that I have read this thesis and in my opinion this thesis is sufficient in term of scope and quality for the award of the degree of Bachelor of
Technopreneurship’
Signature : …………………….
Name of Supervisor : DATIN SURAYA AHMAD
Date : 7 JUNE 2016
Signature : …………………….
Name of Panel Supervisor : DR ISMI RAJIANI
Tarikh : 7 JUNE 2016
THE CHALLENGES OF TECHNOLOGY ADOPTION IN OIL AND GAS INDUSTRY:
THE CASE STUDY OF SOLAR ALERT SDN BHD
EIDIL HARZEQ BIN ZAINUDIN
This report is submitted in fulfilment of the requirement for the
Bachelor of Technopreneurship
Faculty of Technology Management &Technopreneurship UNIVERSITI TEKNIKAL MALAYSIA MELAKA
JUNE 2016
ii
VERIFICATION
“I admit that this report is the result of my own except summaries and citations that each of them has explained the source”
Signature : Name : EIDIL HARZEQ BIN ZAINUDIN Date : 7 JUNE 2016
iii
DEDICATION
I would like to dedicate the appreciation to my family, lecturer and friends
iv
ACKNOWLEDGMENT
I was deeply grateful and wish to express my sincere thanks to Datin Suraya
Binti Ahmad for her guidance throughout this final year project. Her passion and
patience to teach me to finished this research. Besides that, I would like to thanks to
Dr.Ismi Rajiani for his beneficial comment, advice as well as guidance for a quality
final year project.
I also want to express my thanks and appreciate all of those members who
involved direct or indirectly towards this final year project. Last but not least, I also
very want to appreciate to the respondent who spends their valuable time to answer
the questionnaires especially to Solar Alert Sdn Bhd production team that willing to
share knowledge about the current situation in oil and gas industry.
v
ABSTRACT
Technology is the backbone for large industrial on fulfilling the market
demand. Technology adoptions also determine the level of innovation for a particular
country which reflects with nation Gross Domestic Product (GDP). Every technology
provider firm must cope and adopt with the technology revolutionary. This will
ensure firm to sustain and growth in the competitive market. For a country like
Malaysia which prioritise in oil and gas energy as the key economics area, all player
in oil and gas industry must complement with advanced technology in order to
achieve an international standard for this industry. The purpose of this study was to
identify the challenge of technology adoption in oil and gas industry. It is not easy
for firms to adopt new innovation or technology. Through depth study and identify
the challenge of technology adoption, it can reduce the time require to adopt new
technology. This study will focus on CNC technology at Solar Alert Sdn Bhd and
investigate the main challenge such like the organisation factor, compatibility and
technical capabilities. This research used a quantitative method which is survey /
questionnaire to analyse the data from production line staff at Solar Alert Sdn Bhd
(Oil and Gas Division). There were 59 questionnaires that have been distributed.
According to the research finding, it has been identified that the compatibility of
technology was the dominant challenge. It is concluded that the challenge such as
organisation factor, compatibility and technical capabilities influenced the
technology adoption in oil and gas industry. Eventually, this research would help all
technology providers in oil and gas industry to produce a quality product through
advanced technology.
vi
ABSTRACT
Teknologi merupakan tulang belakang bagi industri-industri besar memenuhi
keperluan pasaran. Penggunaan teknologi juga turut menentukan aras inovasi bagi
sesebuah Negara dimana ia berkait dengan GDP Negara. Setiap pembekal teknologi
haruslah mengikuti revolusi teknologi. Ini bagi memastikan kestabilan serta
perkembangan sesebuah syarikat di dalam pasaran yang bersaing. Bagi Malaysia
yang mengkhususkan sektor gas dan minyak sebagai kunci ekonomi. Oleh itu,
semua pemain di dalam sektor gas dan minyak mestilah selaras dengan teknologi
tercanggih bagi memenuhi standard antarabangsa di dalam industri ini. Tujuan utama
kajian ini adalah untuk mengenalpasti cabaran dalam penggunaan teknologi bagi
industry gas dan minyak. Ia bukanlah perkara mudah bagi firma mengguna pakai
inovasi atau teknologi. Melalui kajian yang mendalam untuk mengenalpasti cabaran
dalam penggunaan teknologi, ia membolehkan sesebuah firma mengguna teknologi
dalam masa yang singkat. Kajian ini akan fokus terhadap teknologi CNC di Solar
Alert Sdn Bhd and mengkaji cabaran utama seperti faktor organisasi, kesesuaian dan
keupayaan teknikal. Kajian ini menggunakan kaedah kuantitatif iaitu kajian soal
selidik untuk menganalisa data dari pekerja di Solar Alert Sdn Bhd (Oil and Gas
Division). Sebanyak 59 soal kaji selidik telah di edar. Berdasarkan hasil kajian, ia
telah mengenalpasti bahawa kesesuaian teknologi merupakan cabaran utama.
Kesimpulannya, faktor organisasi, kesesuaian dan keupayaan teknikal mempengaruhi
dalam penggunaan teknologi di dalam industri gas dan minyak. Akhir sekali, kajian
ini dapat membantu semua pembekal teknologi di dalam industri gas dan minyak
untuk menghasilkan produk yang berkualiti melalui penggunaan teknologi canggih.
vii
TABLE OF CONTENT
CHAPTER CONTENT PAGE
VERIFICATION ii
DEDICATION iii
ACKNOWLEDGEMENT iv
ABSTRACT v
ABSTRAK vi
TABLE OF CONTENT vii
LIST OF FIGURE x
LIST OF TABLES xi
CHAPTER 1 INTRODUCTION
1.1 Background of study 1 1.2 Problem statement 4 1.3 Research question 5 1.4 Research objective 5 1.5 Scope of study 6 1.6 Importance of research 6 1.7 Summary 7 CHAPTER 2 LITERATURE REVIEW 2.1 Introduction 8 2.2 Technology Adoption 9 2.3 Individual Innovativeness Theory 10 2.4 Technology Adoption Lifecycle 11 2.5 Oil and natural gas 14
viii
2.6 Advanced Manufacturing Technologies
(AMT)
15
2.7 Production technologies 16 2.8 Diffusion of innovation theory 19 2.9 Compatibility 20 2.10 Organisation Factor 21 2.11 Capabilities 23 2.12 Theoretical Framework 25 2.13 Summary 27 CHAPTER 3 RESEARCH METHODOLOGY 3.1 Introduction 28
3.2 Research Design 28
3.3 Methodological Choices of data
collection
29
3.4 Primary and Secondary sources
3.4.1 Questionnaire
3.4.2 Using SPSS software
3.4.3 Comparison by journal or article
30
31
31
31
3.5 Location of Research 32 3.6 Questionnaire Design 32 3.7 Research Strategy
3.7.1 Survey
33
33
3.8 Sampling Design 35 3.9 Reliability and Validity Test 37 3.10 Correlation Analysis 38 3.11 Regression Analysis 38 3.12 Summary 39 CHAPTER 4 DATA ANALYSIS AND DISCUSSION 4.1 Introduction 40
ix
4.2 Demographic
4.2.1 Gender
4.2.2 Age
4.2.3 Type of technology
4.2.4 Position
4.2.5 Working Experience
4.2.6 Opinion
41
41
42
43
44
45
46
4.3 Descriptive Analysis 47 4.4 Reliability Analysis 48 4.5 Correlation Analysis 49 4.6 Simple Regression Analysis
4.6.1 Objective and Hypothesis 1
4.6.2 Objective and Hypothesis 2
4.6.3 Objective and Hypothesis 3
50
50
52
54
4.7 Summary 57 CHAPTER 5 CONCLUSION AND RECOMMENDATION 5.1 Introduction 58
5.2 Discussion
5.2.1 Objective 1
5.2.2 Objective 2
5.2.3 Objective 3
58
59
60
61
5.3 Limitation of Study 62 5.4 Recommendation for future research 63 5.5 Conclusion 63 REFERENCE 64 APPENDICES 67
x
LIST OF FIGURES
NO TITLE PAGE
2.1 Categories of Adopters 10
2.2 Technology Adoption Lifecycle 12
2.3 Dynamic Interaction of Technology System 16
2.4 Input and Output manufacturing system 22
2.5 Theoretical Framework 25
4.1 Age 42
4.2 Type of technology 43
4.3 Position 44
4.4 Working Experience 45
4.5 Opinion toward technology adoption 46
xi
LIST OF TABLE
NO TITLE PAGE
2.1 Categories of Adopters 10
2.2 Shows the strategic flexibility of production. 18
3.1 Likert Scale 34
3.2 Sample Size 36
3.3 Cronbach Coefficient Alpha 37
4.1 Gender 41
4.2 Age 42
4.3 Type of technology use 43
4.4 Position 44
4.5 Working Experience 45
4.6 Opinion on the technology adoption 46
4.7 Descriptive Analysis 47
4.8 Reliability Analysis 48
4.9 Correlation Analysis 49
4.10 Simple Regression for Hypothesis 1 51
4.11 Simple Regression for Hypothesis 2 52
4.12 Simple Regression for Hypothesis 3 54
1
CHAPTER 1
INTRODUCTION
1.1 Background Study
Technology is the purposeful application of information in the design
production, and utilisation of goods and services, and in the organisation of human
activities. According to Galbraith (1974), technology means the systematic
application of scientific or other organised knowledge to a practical task. Basically,
technology is use for problem solving. This includes a process which through an
explicit or implicit phase of research and development allows for the commercial
production of goods and services (Dussauge, Hart and Ramanantsoa 1992, 13). The
better technology is used within the organisation, the better output that the
organisation will receive. For competitive market such like manufacturing industry,
technology plays an important role which includes a specific method, materials, and
devices used to solve a practical problem in order to increase the production rate. 21st
century global market trends force many industries to use high technology as well as
innovation in order to meet demand internationally.
Innovation is the process of translating an idea or invention into a good or
service that creates values or for which customers will pay. Innovation contributes in
several ways. For example, research evidence suggests a strong correlation between
market performance and new product (Christensen and Raynor, 2003; Foster and
Kaplan, 2002).
2
Technology adoption means different things to different people. Viewing
technology adoption as a consistent process is the key to enabling hesitant users to
successfully adopt and use technology. As developing country, there is a force
driving technological development which required the country to implement
technology transfer. In order to successfully bringing the new technology, it needed
to be adopted so it can be fully utilised in selected industry. Thus, accelerating
technology adoption into system and routines generates manufacturing flexibility by
upgrading the operational competitiveness from the existing level to the required
level by giving a barrier to competitors (Kotha, 1995).
According to Department of Statistic Malaysia (Feb, 2015), industries in the
manufacture of refined petroleum products contribute 23.3% in manufacturing
industries. Compare with manufacturing of other natural products such as rubber,
unvulcanised, vulcanised or hardened which contribute 32.9%. This proves that oil
and gas industries are on the second higher demand in the manufacturing sector. In
order to meet the demand, the concurrent development of industry and technology is
the important factor that needs to take into consideration. The role of the future usage
of oil and natural gas depends on the available resources, the production
technologies, on the future demand, on the development of alternative energy sources
and the existence of reliable energy supply routers (Doukas et al., 2011). However,
oil and natural gas resources are limited and a technology shift reducing the
dependency on these resources is necessary in order to enter into a more sustainable
era (Flamos and Begg, 2010).
During SME MASTERPLAN (2012-2020), it emphasises on accelerating the
performance of SMEs to the next level. The aim is to understand the force that drives
SME performance. According to the World Bank Productivity and Investment
Climate Analysis state that there are six factors which influence the performance of
Malaysian SMEs. To achieve nation with highly competitive in the global market,
growth of employment and productivity, the SME performance levers analysis found
that adoption of innovation and technology was the most important factors. Because
of that, The Malaysian Innovation Agency Act 2010 was enacted to enable SMEs to
embrace the new phenomenon. Furthermore, the Special Innovation Unit (UNIK)
3
was established under the Prime Minister’s Department to assist SMEs in innovating
for their businesses. UNIK aims to introduce new technologies to SMEs. Already,
UNIK has searched universities and research institutes and identified technologies
suitable for adoption by SMEs. The complex growth markets will need SMEs to
involve the inadequate adoption of technology (Preedeban, 2013). According to the
chief executive officer of SME Corp, Datuk Hafsah Hashim, this has been a
significant distraction for SME operations in Malaysia
“The utilisation of technology which is still relatively low poses another
problem or serves as a constraint for entrepreneurs to move forward,” she
explained.
SME MASTERPLAN (2012-2020) also explained that SMSs have limited
diffusion of technological innovation due to lack of participation in the national
innovation system. Other than that, technology upgrading is also viewed as a cost
rather than an investment resulting in poor technology adoption by SMEs. In
addition, the access of unskilled labour has created a disincentive for SMEs to adopt
new technologies and move into higher value-added activities. In RMK10, it
highlighted that SME as the strong support for the large firm to be able to compete in
the higher market.
This research is focused on production technology in Oil and Gas division at
Solar Alert Sdn Bhd. The company are capable to producing a range of Wellhead
equipment, Christmas trees and oilfield related equipment. The product already
enters international market such as Turkmenistan, Bahrain, Sudan, Uzbekistan
Vietnam and etc. To be more responsive to market needs and reduce costs which
align with the concept of manufacturing flexibility, Advance Manufacturing
Technology (AMT) was applied in the production line.
4
1.2 Problem Statement
Technology adoption is increasingly becoming an important issue for both
small and large manufacturing firm due to the latest manufacturing trend. A case at
Solar Alert Sdn Bhd the use of the computer numerical controller (CNC) machine in
their oil and gas division is a basic requirement when firm decide to transform their
traditional manufacturing plant to advance manufacturing technology (AMT).These
changes are the force by demand condition where the consumer wants a variety of
high-quality similar product. Using of technology such like CNC, CAD/CAM, ERP,
RFID CRM and others that not mentioned before can help the firm to be more
competitive. According to manufacturing global (Feb 5, 2015), the manufacturing
trend 2015 is slightly transformed into Internet of Things (IoT) to align with smart
industry concept which is greener. Internet of Things (IoT) will use complex
software where it allows all devices to communicate with one another. Despite it
provide benefit to the industry, but lack of ICT skill will slow down the process.
Drastically changes in technology also as the challenges for Solar Alert
whereby every update on the CNC programme needs to be utilised by the production
line. Organisation should also aware on every changing of technology or else they
will fail in the competitive market. Some research needs to be done before decide to
adopt it because it need to ensure that the changes will fit with the local
infrastructure, as well as manufacturing facilities. Other than that, World Bank
Knowledge Assessment Methodology Innovation Index (2009), state that Malaysia is
on 5th ranking for the firm-level innovation in Asia. The rate of nation innovation is
influenced by the level of technology adoption. For example, the adoption of internet
technology leads to innovation in online business, mobile application and etc. As an
intern at Solar Alert Sdn Bhd, some of the issues were identified during the training
period. Successfully adopt new technology can achieve competitive advantage over
competitor (Porter, 1980).
5
1.3 Research Question
This study is focuses on the barriers of technology adoption. There are several
adoption process models in order to identify the process of how technology is
adopted. Most people adopt a technology by first being aware of the existence of a
technology and forming attitudes towards a technology, following by decision-
making process whether to adopt or reject a technology. After the adoption decision
is made, adopters will use a technology and eventually reach the final stage by
confirming the adoption decision if a technology could function as expected (Rogers,
1995). There are barriers between the processes of technology adoption. This
research was guided by the following question:
1. What is the organisation factor affecting technology adoption?
2. What is the compatibility of having the new technology for adoption?
3. What are the technical capabilities require for technology adoption?
1.4 Research Objective
The research was basically to study the relationship between the challenges and
technology adoption that can increase production rate of Solar Alert Sdn Bhd. It has
been highlighted into the three (3) main objectives:
1. To study the organisation factor toward technology adoption
2. To study the compatibility of new technology through technology adoption
3. To study the technical capabilities require for technology adoption
6
1.5 Scope of study
In this study, researcher focuses on Solar Alert Sdn Bhd Oil and Gas division.
Through this, it can identify the type of technology uses in production line. It can
also study the challenges faced by production line to adopt new technology in order
to increase production rate so researcher can know the important of technology
adoption. In Solar Alert production line, researcher will focus on ICT and production
line technology such as CNC, CAD/CAM to identify the challenges of adopting new
similar technology. By understanding the concept of technology adoption lifecycle
can help researcher to know the challenges of technology adoption. Further
discussion will be explained in Chapter 2 of the research.
1.6 Importance of Study
According to this study, adoption of new technology plays important role in
creating nation economic prosperity. This is because manufacturing industry that
involving high technology, technical capabilities, and innovation can lead to better
production output as a result can increase the nation economically.
This research can become guidance for another researcher. Besides that, this
research also can make to other manufacturer know why diffusion of technology can
help the growth of their company. Through process of technology adoption, there is
challenge that other manufacturer can identify and overcome it to successfully adopt
the technology. In another hand, small industry can know the different perspective
about the importance of technology in business.
Technology adoption acts as the key for developing country to sustain in the
global market force. As for that, this research will provide further information about
the actual time to obtain the technology based on demand changing as well as
another driven factor that force company to do innovation and diffusion of
innovation.
7
1.7 Summary
This chapter I was briefly explained about the research study. It explained
about the aim of the study through specific question from identified problem as well
as the issues involved. It was also included some of the basic information about Oil
and Gas division in Solar Alert Sdn Bhd which included type of technology used,
specialised skills, and dynamic interaction in Solar Alert Sdn Bhd.
8
CHAPTER 2
LITERATURE REVIEW
2.1 Introduction
The 21stcentury natural gas and oil industry are forced by innovation and
technology. It has dramatically altered the manner in which oil and gas reserve are
identified, developed and produced. Advancements in technology have also
improved environmental protection and conservation of natural resources. Due to a
rapid growth of manufacturing technology, most of the large manufacturing firm are
shifting to Advance Manufacturing Technology (AMT) in order to compete in the
global market. The technology will focus on the computer numerical controller
(CNC) machine.
This research examines the challenge of technology adoption in Oil and Gas
industry: The case study of Solar Alert Sdn Bhd. This study will seek the four
challenges toward the adoption of CNC technology in oil and gas industry. The
literature review will demonstrate the theory related to the adoption of new
technology. There are four significances of challenges that carrying the important
role which are compatibility, organisation factor, capabilities as well as a dominant
factor. However, by knowing the challenges of technology adoption in oil and gas
industry are importance to increase the national trade for oil and natural gas which
give impact toward our nation GDP.
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2.2 Technology adoption
Technology means the systematic application of scientific or other organised
knowledge to practical tasks (Galbraith 1974, 31) where a process through an explicit
or implicit phase of research and development allows for the commercial production
of goods and services (Dussauge, Hart, Ramanantsoa, 1992).
Technology adoption is important because it is the vehicle that allows most
people to participate in a rapidly changing world where technology has become
central to our lives. The firm who won’t or can’t adopt will increasingly limit their
ability to participate fully in the competitive market and convenience benefits
associated with technology.
Understanding the factor influencing technology adoption helps researcher
predict and manage who adopts, when, and under what conditions. For some people
technology adoption is synonymous with computer and internet usage. But people
adopt a wide range of technologies that are not obviously computer based.
Technology users differ widely in their attitudes toward technology and in their
skills, ranging from early adopters who will master even the most difficult
technology through to people who will never adopt. Technology adoption comprises
of two processes, acquisition and adaptation (Juhaini et al, 2014 :-
Acquisition: The significance of technology as a source of competitive
advantage has become so widely accepted. In addition, acquisition of external
technologies is an essential mean by which established firms add to their
technical capabilities and products enhance their market power and achieve
strategic renewal. Lastly, the idea of acquisition will bring technology to the
firm, organisation and nation in order to be adapted to the local environment.
Adaptation: The process of transfer is not costless during operational stage
because it requires the allocation of resources and it is a continuous process in
the entire life cycle of the project orientation. For adaptation, there is several
factor need to be seriously considered:
10
o Local preferences might be different
o Imported technology needs special adaptation mechanism to fit with
local values.
o For developing country like Malaysia, it is more difficult to adapt fast
moving high-end technology because it is to specialised and,
o To anticipate difficulties in transferring know-how when technical
and organization-managerial change happens.
2.3 Individual Innovativeness Theory
The individual innovativeness theory is based on who and when to adopt the
innovation. A bell-shaped curve as shown in figure 2.1 and table 2.1 below is to
illustrate the percentage of an individual who adopts an innovation. According to
Rogers (1995), there are five categories of adopters
Figures 2.1: Shows the categories of adopters
Table 2.1: Categories of Adopters
Categories Innovators Early Adopters
Early Majority
Late Majority Laggards
Number of Adopters 2.5% 13.5% 34% 34% 16%
(Source: Brychan, T. (2003), A Model of Diffusion of Technology)
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Categories of adopters:
1. Innovators. These are the risk-takers and pioneers who lead the way. They
are able to adopt despite a high degree of uncertainty about the innovation
at the time of adoption and are willing to accept an occasional setback
when a new idea proves unsuccessful.
2. Early adopters. They climb aboard the train early and help spread the word
about the innovation to others.
3. Early majority. They are persuaded to adopt by the innovators and early
adopters, and may deliberate for some time before completely adopting
the new idea. Their innovation-decision period is relatively longer than that
of the innovators and early adopters.
4. Late majority. They approach innovation cautiously and wait to make sure
that adoption is in their best interests. As a result, they do not adopt until most
others have done so.
5. The laggards. These are the individuals who are highly sceptical and resist
adopting until absolutely necessary.
2.4 Technology Adoption Lifecycle
According to MaRS library (2009), the technology adoption life cycle
(TALC) describes how a market develops for a new product category. By
understanding TALC helps business managers focus product management, develop
future marketing strategies and allocate resources to a thoroughly innovative product.
The figure below shows the bell curve has long served as an illustration of the
market development process for the new product category, Geoffrey Moore
introduced the nation of a “chasm” in the market development process for thoroughly
innovative products in his 1991 book, Crossing the chasm. Given MaRS focus on
assisting technology entrepreneurs, the researcher will use Moore’s version of the
TALC. Figure 2.2 below shows the technology adoption lifecycle.
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